The neocortex receives inputs from two classes of thalamic nuclei. First-order ("specific") nuclei relay to the neocortex sensory inputs from the periphery. Higher-order ("non-specific") thalamic nuclei receive and provide inputs to various cortical areas. Based on exciting new data we hypothesize that this dichotomy is overly simplistic, in that higher-order nuclei function also as important relays of sensory inputs from the periphery to cortical and subcortical structures. We will show that sensory processing by higher-order nuclei-specifically the posterior medial nucleus (POm), the higher-order nucleus of the somatosensory system-is regulated by a critical subthalamic nucleus - the zona incerta (ZI). We will further show that ZI's inhibitory regulation of POm is dynamically modulated by brainstem cholinergic inputs related to sleep-wake states, and by phasic motor cortex inputs related to voluntary movements. This State Dependent Gating (SDG) hypothesis is relevant to understanding the functions of all "higher-order" thalamic nuclei, as they are all subject to potent inhibition from ZI. Because both ZI and POm are implicated in various movement disorders, the anticipated findings may be relevant for understanding the pathogenesis of disorders such as Parkinson's disease.